tv Bloomberg West Bloomberg August 2, 2014 4:00am-5:01am EDT
>> from pier 3 in san francisco, welcome to the best of "bloomberg west," where we focus on technology and the future of business. i'm emily chang. every weekend we'll bring you the "best of west," interviews with the power players in global technology and media companies that are reshaping our world. samsung electronics has been on an incredible run growing its market tap to nearly $200 billion while becoming the world's largest smart phone maker but there are signs their reign on the mountain top maybe coming to an end. their worldwide smart phone market share fell from 32% to 25% in the second quarter as the
company faces increasing competition from low cost chinese competitors like lenovo, huawei. it is a company that is dominating in so many areas you may not know about. our editor at large, cory johnson has a look at the giant that is samsung electronics. >> part apple, part intel, part whirlpool. samsung electronics is a big, bold, and really diverse -- the flagship company itself, samsung group. over 286,000 global employees who brought in $222 billion in revenue last year. you know about the company's huge success in smart phones and tablets. but together, the mobile i.t. division accounted for 54% of revenues last year. samsung's success story goes well beyond the familiar. samsung is the world leader in
d-ram and solid-state drives. the company makes mobile chipping counting fierce rival apple as one of its biggest customers. manufacturers of led lighting fixtures as well. samsung if the top flatscreen maker for tv's. the company has also cashed in on making large-format displays. those displays are not just for televisions. samsung has taken its digital know-how to appliances. the company claims to be the umber one maker of refrigerators, more than 10% of the u.s. appliance market. >> for more on the state of samsung's business and whether they can keep hoveled their global dominance, i spoke with cory and benedict evans. i started by asking benedict if he thinks samsung can maintain its dominance in the mobile ndustry.
>> the android business is really unstable and uncertain at the moment. it is starting to look more like the pc market developed, with the components commodified underneath. samsung and most of the android areas have been unable to create a value added in services on top. you have a commodity product, a commodity component. the question for the last two or three years that everyone has been asking is their position sustainable? what you may see in a couple of months if apple comes out with a larger screen phone, and the way iosa allowscustomize the iphone, you may you to see apple taking a larger share of the high-end market away from samsung. it is kind of a threat from both ends of the market. >> samsung is also coming out with a couple of higher-and devices later this year, over the next six months as well. that has been a strategy, but is it the right strategy? you have been doing so much work on market share and crunching the numbers. how are they looking?
>> the pressure from the ones below it is really starting to take effect. i think samsung has two-part approach now. they have got to continue to focus on maintaining a position at the high-end. trying to compete for that flagship. the market share will be driven by the low end. they have to focus their strategies in these two areas. their marketing investment, which has taken them to the top over the last couple of years, has been focused at the flagship. if that continues, that will help them. the reality is that they have got to change up that flagship strategy that has somewhat gone stale now for two or three years. and try to compete and differentiate. it is really challenging. >> benedict, is it you who said that samsung is dominant but paranoid? >> there is lots of different ways to describe samsung. they cloned nokia. people talk about similarities with apple products. every product, every spectrum, every technology, every operator, every country and over $10 billion a year to support that.
the question was always, at what point does the commoditization involved in running a business and the come opponents of a commodity, basically logistics and manufacturing company -- when does that catch up with you? samsung has spent two or three years at the top of the market. they have not managed to create any sustainable value on that. they have not created any reason why your next phone should be a samsung. it is not quite clear how they would do that anymore than it was clear how dell or hp could do that. >> xaomi came out of nowhere in china. apple is finally coming out with a new iphone. cory, what do you think about samsung's strategy? does it need a dramatic shakeup, in the sense that they have been making devices for everyone, but should that change? >> you saw samsung doing a lot of things to try to differentiate their devices, talking about everything from a
barometer in a phone to having crazy announcements over their phones. i remember being in new york at radio city music hall, and they had a tap dancing child on the stage to illustrate how their phone was going to be pervasive even to the tap dancers of the world or something. i think that, you know -- to the point of what makes these phones special, there has always been some tension between samsung and google about what would be different about their phone, what would be unique to their phone. one continually wonders if the day all, where there is a samsung map or an apple map or a map from somebody else, microsoft or somebody, on the samsung phone. will they start to do things to break away from the android operating system in little ways to get less google on the phone and have something that is unique to samsung? and do they have any skills in that? they certainly have the market share and resources to do that kind of thing.
you saw a huge span of research and development from samsung that helped add to that operating disappointment. the question is, what are they going to do with that, and it might be something that is unique to samsung? they are just as important to the marketplace as google is to samsung. >> what is samsung's identity? what is samsung's soul? >> they have been extremely effective of cloning nokia and producing this very wide range of hand sets. what it has not really been able to do is get any sense of loyalty or sense of identity or a clear sense of why your next sense should be a samsung opposed to one of its competitors other than that phone is everywhere. as you start seeing more competition coming from cheaper chinese manufacturers in the mid range and you see them starting to see the market run out of ideas how o to differentiate the
high end. >> they are in a tough spot because they are using the android operating system. they have a relationship with google to maintain. ryan, what do you think samsung's choices are? >> i think there is a few. one is to continue to be a good hardware -- >> they are just good at 45rd ware and not as good at software, the problem is still their identity. >> you have seen them over the past year start to build a samsung developer conference and they are going to continue to do this and they are looking to build the services. as you log into a samsung phone, you're prompts to go into samsung services and music. the reality is that is not that easy to do. > benedict evans of andreessen horowitz, ryan reith of idc. still ahead, he has challenged the big guys his aggressive price cuts and now another
>> welcome back to the best of "bloomberg west". i'm emily chang. t-mobile has been making waves in the wireless industry for its turnaround and now the uncarrier is proving to be a popular acquisition target. french wireless company iliad has made a takeover bid for t mobile offering $15 million in cash for a more than 66% stake in t mobile. sprint and its parent company have also been pursuing a takeover of t mobile. their owner says the offer is better. spoke with the always
outspoken c.e.o. john legere about sprint's deal, but before the iliad bid, listen closely to some clues he gives about t-mobile's future. >> in q1 we announced contract freedom, it was the launch of paying early termination fees and that caused an aggressive spike. among other things we did today, we raised our guidance for postpaid subscribers for the year now saying we will be between 3 million and $3.5 million. evidence that we fill our momentum will continue drug the rest of the year -- throughout the rest of the year. >> you are enabling more customers do have contracts, does that mean they are are buying less expensive phones? the iphones and the samsung green bay packersies. -- galaxys. and are you selling more low and middle tier phones? >> the uncarrier carrier movement is focused on solving
pain points for customers. we want 100% no contract. customers love it. any time upgrades. the industry has adapted. international data roaming for freerks tablet freedom and then paid early termination fees is another aspect of contract freedom and something we can do very profitably. what you are seeing is that 93% of our phone sales last quarter were smart phones. we are selling the highest end devices and we will be the biggest beneficiaries of any new device that comes out because the switching tool is noting they are most likely targeting a switch. t mobile. and what better to cause a switching pool to make decisions then an iconic device. there are some variables that are great for the fastest network in the u.s. >> if a new iphone comes out, which we are expecting, how many new customers do you think you will get as a result?
>> obviously i have given guidance for the forecast. for the rest of the year. i am not going to comment specifically on how many. i am going to point out to you t-mobile, because of its timing of launching the iphone, we have the lowest percentage of our base that are customers with iphones. when a in iphone comes out, the whole base is waiting for an upgrade. we are the least susceptible to this big event that is going to take place and expect to be the biggest beneficiary. think about that. 33% of customers are likely to switch, a big base of change comes out due to a new device. where do you think customers are going to go? we are excited about that and a lot of other things that are causing this momentum in our usiness. >> to me, it sounded like you backed away a little bit from the idea of sprint-t-mobile deal is the only way. is that just me?
> i backed away. first of all, you know me better than to see me back away from anything. i have been very consistent. i will not comment on any specific transaction for the company, never have. i've always been consistent that in the long term, if i really want to bring long-term competition and lead the industry in the united states, scale is important. capital is important. one of the accelerants could be a transaction of some type. i've always said we have multiple options to look at that. in the short term, i have pointed out this company is hitting on all cylinders and we've got great runway. we will consider multiple options to look at things that accelerate the uncarrier. i have been consistent all along. >> we know if it happens, you are the guy in charge but if it
doesn't happen, you're the guy who has to figure out what to do. how else do you add scale? >> you know my opinion, with a transaction, without a transaction, i am in favor of john legere being in charge of anything. that is my position on that. it always has been. listen, you know, i have said many times, there are multiple players and multiple options for the company. i am not going to comment on any specific one, but you can figure it out. how do you get scale and spectrum and capital? one way is to move aggressively, the way we are, to raise capital. participate in the options. and then various accelerants exist internationally, domestically, and i think you should be clear, there is great interest in t-mobile. we will consider any option that exist for the shareholders. > my interview with ceo john legere. amazon is known for being secretive. the company has gone public with
>> welcome back to the best of "bloomberg west". i'm emily chang. the battle over e-book prices with amazon and hachette group takes a new turn. amazon said the company's key object sieve to lower e-book prices. arguing if the books were priced at $9.99, there would be more room for sales. what does the publishing industry and authors have to say about the proposal? i spoke with mark coker.
and a self-published author. i started by asking hugh who has been a supporter of amazon throughout this dispute what he thought of the company's latest response. > i'm happy that amazon is finally talking about what their negotiation terms are. it confirms everything i suspected just from watching the company over the years and dealing with them as an author and publisher. they went through this in 2010, fighting for reasonable e-book prices. back then the response from publishers was to form a cartel and collude with their supposed competitors in order to to artificially raise the prices of e-books on readers in order to protect their legacy print industry, or to make as much money as they possibly could off of readers. i think it has been to the great detriment of the authors that
-- at hachette that they are fighting for these higher e-book prices. i'm glad amazon is finally talking. we are in a weird situation where you say hachette has not returned your calls for comment. it is usually the other way around. hopefully this will put some pressure on hachette to come to the table and negotiate in good faith because it sounds like they have not been doing that. >> mark, amazon wants 30% and it also wants hachette and the authors to split the remaining 70%, which is different from the way it is today. i believe authors get 25% today. can you explain how this is different and what amazon is proposing and what authors actually take away when they sell a book today? >> some of what amazon is proposing here is a disingenuous smokescreen. if amazon really wanted to offer consumers lower prices, it would be doing other things differently. right now amazon for self
published authors penalizes the author if they price the book under $2.99. you only earn 35%, rather than 70% list. right now amazon makes it really difficult for authors to price their books at free. the only way to price your book at free is to enroll in their exclusive k.d.p. select program. i don't think this is just about raising prices. i think this is about amazon gaining control over the price, and control over the e-book margins. if you look at what amazon said in their blog post, they are talking about 70% of revenues. 70% of proceeds. they are not saying 70% of price. what he publishers want is the freedom to set their own prices, and earn 30% list and give the retailer 30% list on e-books. the publisher wants to earn 70% list. it should be the publisher's decision what they pay the authors.
i agree with many of the critics and i agree with hugh, that publishers are not paying their authors enough. they're only paying their authors 25% net, which works out to 12% to 17% of the list price. if you look at what self published authors are earning, they are earning 60% to 80% of the list price as their e-book royalties. there is a big gap here in what publishers are paying and what self published authors are earning. >> now, amazon makes the argument -- they use the price $14.99, they say if they reduce that to $9.99, they would sell 74% more books and bring in 16% more revenue. i want to bring in our editor-at-large, cory johnson, who has been looking at this very closely as well. cory, is it a smoke screen, as mark says? >> mark is right to point out how cleverly this is written. the notion of -- the publishers
can do the exact same kind of mass. they have done their own price analysis. price analysis like this is never fixed. they don't know for sure that every title will have the same pricing dynamics. a lower price will equal that much greater sales. they make it seem like it is math set in stone. the other thing we're doing here is at the end of their note, which i have tweeted out -- it is an interesting one. they do try to create another area of focus, which is how much the authors are getting paid, arguing that the publisher should split 50/50. 35% to the author and 35% to the publisher. pointing out that the publishers don't do this right now. getting authors ticked off that amazon is a problem for amazon. amazon is trying to sway their opinion, suggesting there on the side of the authors, and writing that in a blog post. >> hugh, as an author, what do
you think? do you think amazon cares more about amazon, or does amazon actually care about you? >> amazon cares about amazon foremost, the reader second-most and the author right behind the reader. i have never been treated as well by any publishers as i have amazon financially. it is night and day. mark is trying to make a different argument about e-book pricing saying that amazon punishes e-book prices that are too low. amazon just released a pricing rule. it is not that amazon is just for low prices or higher prices. they are for optimal pricing. what they have right now is publishers charging too much for e-books in large part because of protecting relationships with bookstores, with their legacy print industry. i know this for a fact. i am working with over 30 publishers around the world, and they have told me they cannot lower the price of my e-book because it will upset bookstores.
your expert who thinks that publishers are doing a price analysis and making a logical decision -- that is not how these decisions are being made by publishers. they are being made emotionally, they are made because of existing relationships, because they don't want e-books to gain penetration because it takes their power away. people who think that publishers are behaving logically here in the best interest of authors for -- or readers have not studied the history of the publishing cartel that exists in new york right now. it is not operating in the best interests of its own authors. i hope amazon wins this fight and we get e-books at a reasonable rate. >> cory johnson and we hugh howey and mark coker. sarah pail season launching her own online news channel. up next, we talk to the heads of it to find out the plan for the
west." i am emily chang. former alaska governor sarah palin became a household name when she was the 2008 republican vice presidential nominee. her stances on issues of won many fans and many critics. she will have a new platform to speak about her views. she will have her own online news network. >> hello and welcome to a new project. of this is a news channel that is more the news. of this is a community where we will be able to share ideas. we will be able to discuss the issues of the day and find solutions. of are you tired of the media solutions? we are going to do something about. >> it launched this week with
memberships starting at just under $10 a month. a online mediay venture. i spoke to the founders. i started by asking them what exactly we are going to see on the sarah palin channel? >> we are going to see a lot of material broadcast from her home where we have cameras planted all over the place. we have mobile cameras so she can shoot on the fly. she is going to be posting material every day. there is going to be a range of her commentary on events of the day. she is going to throw ideas to start conversations. she is going to show behind the scenes footage of their lives up there. she is going to be responding to material that her members post to the channel. she is issued an invitation to members to put their own videos and ask their own questions and
make a conversation. >> ellis where the stands between a 24 hour news network like bloomberg or cnn and youtube? >> it fits in between. this is a channel where sarah is the editor. she makes the editorial decisions. this is not a typical news organization. it is gathering news from all over the world and trying to give you the best of what they can in the time that they have. this is sarah talking to her fans. she is having a conversation with people who think and believe in a lot of what she believes. that you arend just beginning this new venture and she is the start. who else you talking to and what kinds of personalities are you looking for? >> there is no limit to the
person who can succeed in this arena. anybody who has got an oversized personality, something to say and a rabid fan base that is dying to hear what you have to say can do pretty well. we are looking at a range of categories. sports to lifestyle and cooking. entertainment. music. finance. there is no limit. think of the person you idolize. you would want to hear more from them on a one-to-one channel. traditional media can't accomplish this. you can find individual people's channels on directv or comcast. these channels don't have to appeal to everybody. they just have to feel -- appeal to your fans. you can have a much more direct conversation with them.
you don't have to worry about the other filters that you have to think about it is you are broadcasting to a wide group of people. these are people who already let you know that they are your fans. they want to hear more from you. glenn beck seems to be doing well doing his online network of sorts. are you looking for people who are polarizing or biased? can you give me more specifics? >> nobody feels that they are biased. they believe in the things that they are talking about. it we are looking for people who have something to say that is resonating with an audience that wants to hear more of it. they don't have to necessarily be controversial. you could be a great musician who delights tens of thousands of people around the world in concert arenas. they might be wanting to touch
your world and have access to your life and why you wrote the songs the way you did and what you are performing and what guitar you play. there is no end to the types of content. you could be a wine connoisseur and just turn on your phone or your tablet when you're on the go and learn more about your passion. >> sarah palin is to criticize cnn when you are there. what were those negotiations like? >> she is a fantastic person. she is a lot of fun. she is an amazing moose chili cook. i have the knit up in alaska. to have thisined connection to her audience. >> moose chili. i can only imagine. let's talk a little bit about the price. it will cost more if you want additional personalities.
can you share information about you are splitting the revenues between the personality and your company? >> we really don't discuss the financials. especially with individual relationships like this. but we can talk about is the subscription model in general. it is superior to the advertiser model online. traffic we need to generate in order to have enough revenue to become profitable is much smaller than what you need to be profitable when you're are advertiser supported. they interview with founders of tap. blackberry talks to us about the future of the smart phone maker. i asked him tea questions. can he really turned around?
>> welcome back to the best of "bloomberg west." i am emily chang. like perry has had its share of troubles over the past two years. the company's global smart phone market peaked in 2009. today that number is less than 1%. what does blackberry ceo john chen say about the company's future. you sold. are you going to sell blackberry? >> there is a standard answer. the nonstandard? i would want to look at values before i contemplate that. >> you have to look at your
shareholders. >> it is only fair. it is also the employees. ofthere has been a lot speculation about offers come across your desk. i don't have any offers on my desk. people like to talk. talk is not an offer. >> would you sell to a chinese company? >> the answer is we are probably unable to do that. biggestone of the in-store bases in government. and the g7. i think there will would be a lot of regulatory issues and concerns. i appreciate that. >> what you give your own chances for success? >> if you're talking about creating value, i think i can do that. >> 100%?
>> i would say better than 80/20. i am comfortable where the company is today with how we managed our technology and our businesses in the margin and the distribution channel and all the new product is coming out. the strategy gets into overnicating all stuff time. i think there is enough runway for us. we scale our expenses to a level that allows us to invest and make money. i am comfortable with generating more value. whether it will be good enough to be iconic again, that is something that i need to chew on. i don't know the answer to that question. >> my interview with blackberry ceo john chen. there will be a full-length area on studio 1.0.
>> welcome back to the best of "bloomberg west." i am emily chang. linkedin has been on a buying spree this year. they acquired a professional social network. they just rolled out a new line. i spoke to the senior vice president of product and user experience and ask them to explain how the new mobile profiles are different from the old ones. follows the theme of relationships. we launched a new product called connected on mobile devices. we believe that relationships matter in a professional life.
we established those relationships when we meet new people. we want to more about -- know more about them. instead of using an icebreaker of talking about the weather or the price of gold, let's make that more personal. the new profile makes it easy for both the individual and the people who are looking at the .rofile it becomes more personal and intimate. a big focuss been for you. what growth are you seeing in mobile as opposed to desktop? >> it has been growing nicely for us. we announced at the end of last quarter a 43% growth on mobile devices. will announce our earnings and a couple of days and you will see new numbers in that direction. i really look at our mobile interaction as a means of
enabling professionals to work. it is a key part of our strategy. it is a great crucible for innovation. as we roll out new things like a mobile row file, we want to -- to put that want back into the desktop product as well. >> are we going to see new profiles on the user desktop? always integrating the things that we learn from one platform onto the other. it ton definitely expect show up on the other. i will let you know when we integrate those things. reid hoffman and i asked him a little bit about what keeps him up at night when it comes to linkedin. what he thinks about in the future. >> i worry about are we under
delivering against the opportunity. we have this ability to have a professional identity and change the way they work. are we doing well enough against that very learn -- long-term opportunity. there are things that need to be done over years to get there. are we being bold enough? >> he want to say are we taking bold enough steps and making big enough decisions and taking risks. how are you try to do that on a daily basis? linkedin is that capitalizing on the opportunities that you think is out there? >> i think that resonates with me and the executive team. we are continuously taking bold bets and exploring new avenues to fulfill the promise of what linkedin means to over 300 million members. we are looking at new ways of inventing.
if you think about as professionals, we get busy and are too focused on what we are doing. are we doing enough? are we presenting ourselves in the best possible way and putting the best foot forward? that is part of the opportunity that read talked about a clip. we are trying to accomplish that vision. it is a long journey. we are only 11 years old is a company. great companies continue to deliver on really far-reaching visions. that goes on for decades at a time. human making a lot of smaller acquisitions. you have been making a lot of smaller acquisitions. how much more of this are we going to see? >> they fit in nicely with our strategy.
how people in your network show up in the news helps our relationship with them. this is true of the mobile profile. it turns out that he went to the same high school. i would never have known that. >> in really -- really? in hawaii? >> that is with these acquisitions are about. how can we further that goal of enabling the professional to be the best at what they are and grow their relationships? >> that was my interview with the senior vice president at linkedin. sending people to mars. how realistic is? that goal expert. a space travel
>> welcome back to the best of "bloomberg west." i am emily chang. abletly spacex made statement saying the company could be sending people to mars in as little as 10 years. how realistic is this? cory johnson i spoke with the chief technology officer for inspiration mars. i asked just how far away we are from humans landing on the red planet. >> landing on mars is the real trick. i think we are much closer to getting people in the orbit of mars or flying by mars. that i think would be a great near-term goal. it landed on mars is going to take some technology development. it would be a one-time rover
that we have landed. that is an amazing a compliment. we learned that landing a five-time lander with crew on board is going to be really tricky. we will need several of those. it is difficult. it is no more difficult than apollo was when back then. it is not quite that hard. >> they have different companies working on this from nasa to spacex. who is going to get there first? >> i think it is going to be a team effort. spacex has gotten where they've gotten by working with nasa, both funding and technical expertise. they have done an amazing job. these public and private partnerships are the key. philanthropies are working with nasa. commercial companies are working with nasa. further, whatyou
about getting back from mars? >> if you only go to the orbit then getting back is easy. if you land on the surface that is part of why getting there is so hard. you have to land all the things that you need to get back off the surface. if you could land equipment to make your rocket fuel on the surface of mars, that is enabling. it is hard to land our rocket fuel on mars and then take off with that fuel. you have to make it while you are there. >> you have in planning your own trip to mars for the better part of two decades. why? why do want to go so badly? >> i think going there really involves doing something that is so hard that is worthy of america.
part that a lot of people miss about the space program. america needs those kind of hard technical challenges, both to spur innovation but to inspire kids into the sciences and to show what amazing things can be done with science and technology. it is all about making america strong. >> how does a business model differ? there was an enormous government spending in the apollo program. how is the business model different for this massive effort now? more innk nasa can do the way of partnering with philanthropies and companies for sponsorship. i think there is going to be more international partnering as well. nasa and the congress need to take a leadership position. they define the partners that make it happen. people keep talking about what
huge amounts of money this is going to be. maybe we have to get up to 1% of government spending to inspire america and secure our economic future. we are not talking about that much money. especially if nasa works with other entities like philanthropies. >> what about the technology? what do we need to get there that we haven't developed yet? of the big differences between now and apollo was we had to invent just about everything for apollo. now the things we need to invent really involved landing on the surface of mars and getting back off the surface of mars. the space station has proven that we have the technology to get to and from mars and to live on the surface. there is more testing to do. a lot of the propulsive and life support is in place. there is that last step of
getting to the surface of mars and back off the surface. >> spacex has been talking about going beyond mars and dominating the solar system by 2100. do you think that is possible? >> i would never want to estimate elan musk. they do amazing things. i hope they are not the only ones. it would be a shame if there was this one a monopolistic company that dominated the solar system. i would hope that in good american tradition that several companies would be competing. they are certainly the leading -- leading the way. >> that was the chief technology officer. that does it for this edition of the best of "bloomberg west." throughcatch us monday